Equity REIT returns see steepest decline in 2022 since financial crisis

Dzmitry Dzemidovich

Equity REIT returns saw the steepest decline this year since the great financial crisis, with the FTSE Nareit All Equity REITs index decreasing by 27.46% in value in 2022.

The index had declined by 41.12% in 2008 and 19.05% in 2007, but had largely posted an increase in value in the following years. In 2020, the year of the onset of the COVID-19 pandemic, the index had seen a decline of mere 8.40%.

The real estate sector in entire has seen a rough year throughout 2022, with the Real Estate Select Sector SPDR ETF declining by 28.68% YTD.

Comparatively, the S&P 500 index declined by 19.44% in 2022.

Office REITs, noticeably, lost 40.40% of value in 2022. SL Green Realty (SLG) in particular has lost 56.66% value YTD, amid declining demand and occupancy of office properties and the rising popularity of remote work culture. The company is expected to cut its dividend further in 2023.

Another office REIT Douglas Emmett (DEI) declined by 55.09% this year.

Residential REITs are the next major laggards among subsectors, having lost 33.28% of value in 2022.

Specialty REITs, compared to other subsectors, have performed better this year, declining by only 5.71%. Particularly, VICI Properties (VICI) saw an increase of 8.21% in returns, while Gaming and Leisure Properties (GLPI) gained 7.52% in value.

Meanwhile, mortgage REIT returns saw a 35.08% decrease amid an increasing interest rate environment and deteriorating housing market.

Here is a look at the subsector returns: